Tag Archives: Amazon.com

I wrote the following analysis on Amazon.com’s GAAP accounting manipulation for Seeking Alpha…

Amazon.com (AMZN) released its earnings on Thursday, February 1st after the market closed. The headline net income number was $3.85/share. This blew away Wall Street’s estimate of $1.85/share, which is a bit peculiar since the traditional “beat the Street” earnings game is accomplished by guiding Wall Street analysts to an earnings consensus that is slightly below the posted result.

The revenue growth rate was truly impressive. For Q4 2018 vs. 2017, revenues jumped 38.2%. For the full year, revenues grew 30.8%. However, without question AMZN’s free 2-day shipping associated with its Prime membership is the driving force behind sales growth. But at what cost? The table below shows AMZN’s revenue growth rate plus cost and operating margins from 2005 – 2007. The data is from AMZN’s 10-k filings.

Cost of fulfillment is the cost of de-stocking an item and getting it to the customer’s doorstep. The fourth line item above shows fulfillment costs over time. As you can see, the cost of fulfillment as a percentage of revenues has doubled since 2006. For every dollar of revenue, AMZN spends nearly 23 cents getting inventory delivered to end-users.

I also publish the Short Seller’s Journal, which is a weekly newsletter that provides insight on the latest economic data and provides short-sell ideas, including strategies for using options. You can learn more about this newsletter here: Short Seller’s Journal information.

I’ve been subscribed for a number of months now and really appreciate your newsletter. It has been quite profitable. In fact I had bought the $15 August puts BZH, Bought at $0.70 – yesterday $1.82 – 160%. Other recommendations have also paid off well. Thanks again for your hard work. – subscriber feedback

Americans are filing for bankruptcy at the fastest rate in several years. In January 2017, 55,421 individuals filed bankruptcy. That’s a 5.4% increase over January 2016. In December 2016, 4.5% more individual bankruptcies were filed than in December 2015. It’s the first time in 7 years that personal bankruptcies have risen in successive months on a year over year basis.

Also notable, in 2016 the number of U.S. Corporate bankruptcies jumped by 26% over 2015. U.S. Corporations have issued $9.5 trillion in bonds. That’s 61% more than they borrowed in the eight years leading up to the 2008 de facto financial system collapse (aka “the great financial crisis”).

The Financial Times reported that over 1 million U.S. consumers – prime and subprime – were behind on their car loans and that the overall delinquency rate had reached its highest level since 2009. The FT also stated that “lending to consumers with weak credit scores has been one of the fastest growing parts of the [banking] industry.” It’s starting to smell like early 2008 out there.

This is information and data that you will not hear on any of the “Bubblevision” financial “news” programs or read in the mainstream financial media. It’s also information that is not being factored at all by stock prices.

Americans are bulging from the eyeballs with mortgage, auto, credit card and student loan debt. The amount of outstanding auto debt hits a new record every month. Of the $1.2 trillion in auto loans outstanding, over 30% is considered subprime. In fact, I would bet good money that the number is closer to 40%, as the same type of non-documentation loans that infected the mortgage market in mid-2000’s has invaded the auto loan market. It was recently disclosed that the 61+ day delinquency rate on General Motors’ securitized subprime loans has soared to levels not seen since 2009.

To put the amount of subprime auto debt in context, assume 35% of total auto debt outstanding is now below prime (subprime and “not rated”). This equates to $420 billion of below prime debt. The total amount of below prime mortgage debt during the mid-2000’s housing bubble was about $600 billion. In other words, the subprime auto debt problem could easily precipitate another financial markets catastrophe.

Although the retail sales report for January earlier this month purported to show a 4.9% year/year increase in retail for January, the majority of the “gain” came from the rising price of gasoline during the month (the gasoline sales category showed a 13.9% gain over January 2016, most of which can be explained by higher prices). In fact, the .4% “gain” from December 2016 to January 2017 reported for the overall retail sales number lagged the Government’s measure of inflation. Real, inflation-adjusted sales from December to January declined by 0.20%. (Note also that the retail sales report is derived largely from Census Bureau “guesstimates” due to the supposed unavailability of real-time data. This explains why typically previous reports are revised lower – I detail this in my weekly Short Seller’s Journal).

Debt-squeezed Americans are spending less on discretionary items, especially clothing. This is why Walmart has launched a new price-war agenda aimed at the grocery industry, big-box retailers and Amazon.com. The retail spending “pie” is shrinking and Walmart intends to do fight hard to maintain the size of its piece. For all the attention focused on Amazon, Walmart’s annual revenues are nearly 4-times larger than Amazon’s. And make no mistake, Walmart has plenty of room to fight, as its operating margin is nearly double AMZN’s – and that’s before we adjust AMZN’s highly misleading accounting, which would reduce AMZN’s margins.

Despite the Dow hitting new all-time highs for a record number of days in a row, The S&P retail ETF, XRT, is currently 10.4% below its 52-week high. It’s 15% below its all-time high, which it hit in mid-July 2015:

Target (TGT) is today’s poster-child for the retail sector, as its Q4 earnings missed expectations badly and it warned for 2017. Its quarterly revenues dropped 4.3% year over year and its full-year 2016 earnings fell nearly 6% vs. 2015. Operating earnings were crushed, down 42.2% in Q4 2016 vs. Q4 2015. The stock is down over 11% right now (mid-morning trading on Tuesday).

I would also suggest that the revised GDP for Q4, reported to be 1.9%, is derived from Government statisticians’ manipulation because most of the gain is attributed to consumer spending. Tell that to holders of XRT and RTH.

The economy is sinking further into a recession despite the propaganda coming from Wall Street, financial bubblevision “meat with mouths” and the mainstream media. Real median household income continues to decline and the Fed/Government intervention in the stock market is helpless to prevent this fact from being reflected in many sub-sectors of the stock market “hiding” beneath the headline-grabbing Dow and S&P 500.

My Short Seller’s Journal presents analysis like this to subscribers every week. There’s a big difference between what gets reported and what is really going on. My journal looks “under the hood” of the headline economic reports in order detail what’s really going in in the economy. Most of the analysis and assertions are backed up with actual data. I also “de-construct” the game of “beat the earnings” which makes headlines and stocks pop, but also creates short-sell opportunities. Each issue presents at least two short ideas, along with suggestions for using options and managing positions. The retail sector has been fertile shorting ground and the housing market is next. You can subscribe by clicking on this link: Short Seller’s Journal – plus receive a discount link to my Mining Stock Journal.

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The western media – especially any mainstream U.S. news source – has made it a habit to blame the world’s problems on Russia and China. The U.S. economy is aces – when the U.S. stock market drops it’s China’s fault.

Bloomberg published a report yesterday which presented China’s commodities futures market as the world’s most speculative mania:

What started as a logical bet — that China’s economic stimulus and industrial reforms would lead to shortages of construction materials — quickly morphed into a full-blown commodities frenzy with little bearing on reality. Bloomberg News

But let’s put China’s commodities trading frenzy in the context of the stock that I estimate is the biggest corporate Ponzi scheme in U.S. history:

AMZN trades at a trailing GAAP p/e of 562x. I use the term “GAAP” here quite loosely because there’s GAAP and then there’s Jeff Bezos GAAP. It trades at 23x book value, 30x tangible book value and 40x EBITDA. Bezos claims that AMZN threw off a couple billion in “free cash flow” for Q1. Yet, if this is a provable fact, how come AMZN’s cash balance declined $3.4 billion from the the end of Q4 2015 to the end of Q1 2016? Someone is not telling the truth…

It did not hit me until this morning (this was well before the Zerohedge article reporting a similar concept later in the day) that the reason the SEC and Congress do not open an investigation into Amazon’s accounting is because Jeff Bezos owns the Washington Post. That’s a very powerful weapon to dangle in front of a Washington, DC politician or bureaucrat.

AMZN stock hit an all-time high today because some chode from a Wall Street bucket shop issued a “buy” with a price target of $1,000. The analyst did not have any specific fundamental reasons for why the stock was worth $1,000/share. But then again, I’ve never seen anyone besides this blog and a few others attempt to hold these Wall Street hand-puppets to any reasonable degree of accountability.

The Bloomberg article references the the Dutch Tulip bulb mania of the 1600’s and the internet bubble of the late 1990’s in the U.S. when referencing the frenzied activity in the Chinese futures markets. How convenient for Bloomberg to overlook that the fact that the greatest investor fraud of all-time is domiciled right here in America.

Yes, I suppose just like Bloomberg’s assertion that Chinese commodities futures “started off as a logical bet,” at time in its infancy as an online book reseller Amazon’s stock was a logical bet. But fueled by Fed money-printing, regulator-enabled fraudulent accounting and extreme investor greed, Amazon stock is the embodiment of a financial system that is completely corrupted to the core.

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The stock I feature in the latest issue of the Short Seller’s Journal was down 3.5% today. The company’s revenues are highly correlated with the GDP, which is going negative rather quickly. This stock easily has another $20 of downside by the middle of the summer, which would be another 33% from here.

Icahn has always been one of the shrewdest investors out there. I doubt he’s betting on anything less than a 35-50%% decline. The SPX could drop 50% tomorrow and still be overvalued. Based on historic GAAP accounting and historical valuation metrics, the S&P 500 is intrinsically worth 500-800.

I am working to determine whether TSLA or AMZN is the biggest stock fraud in the history of our markets. Both companies aggressively implement the same business model: charge the end-user (buyer) a price below the all-in cost of getting the product from the factory floor to the customer’s possession for the sake of generating revenues.

AMZN stock has run up $72 to $673 (Friday’s close) since its earnings were reported last Thursday. The Company continued with the same highly misleading accounting in Q1 2016 and the misleading presentation of its numbers that I layout in Amazon.con. AMZN burned through OVER $3 billion in cash during Q1 2016 despite making the claim that it generated $5 billion of free cash flow.

Of all propaganda-promoting publications, the Wall Street Journal featured a story last week which outlined the ways in which Elon Musk (TSLA founder) moves around cash among TSLA, Space-X and Solar City, depending on which entity recently raised money and which entity needs money. Pure Ponzi scheme.

TSLA is now down over 6% from when I originally recommended shorting it on March 27, despite the fact that SPX is slightly higher. I reiterated the recommendation in last week’s Short Seller’s Journal issue – it’s down 17% since then.

The S&P 500 is getting ready to roll over again and edge off the cliff. It’s not a question of “IF” but a matter of “WHEN.” In the latest Short Seller’s Journal I present three great short ideas, including a not well known company who’s revenues are highly tied to GDP activity. This stock could easily shed $30 over the next 3-6 months. Subscribers to the SSJ gain access to the Mining Stock Journal for half-price (and vice-versa). You can access the SSJ by clicking here: Short Seller’s Journal.

It’s been estimated that at least a third of the 175 oil producing companies in the U.S. are at risk of slipping into bankruptcy this year. At some point banks are going to have to start foreclosing on defaulted loans and many companies will be forced to liquidate. Shell Oil announced this past week that it is exiting its North American shale operations. The writing is on the wall. This is going to inflict a significant amount of damage to the U.S. economy – an amount of damage that is not yet being anticipated by investors or by the policymakers. – the February 28th issue the Short Seller’s Journal

This week I feature a two stocks that can treated either as a “quick hit” or positioned as a long term short. I’m also going to include a highly undervalued silver mining stock as a “contra” stock market idea. For new subscribers, because the precious metals sector tends to move inversely to the stock market, going long mining shares is similar to shorting stocks.

I also review some strategies for using puts to either speculate on a big move lower or replicating a longer term short position in AMZN – see AMAZON dOT CON.

You can subscribe by clicking on this link – SHORT SELLER’S JOURNAL – or on the image below. Subsribers to SSJ will be able to subscribe to the Mining Stock Journal for half-price. The debut issue should be out this upcoming week or the following week at the latest.

A reader reports: Hi Dave, I’m in the Amazon puts with 300 strike price that I bought on Jan 17 before they reported earnings. I’ve made $7500 on the trade. Also I read that you think silver is the play of the decade! I’m going to take those profits plus $2500 and buy a box of silver eagles and put the rest of my capital from the put trade back into more AMZN puts! Thanks!

NOTE: AMZN has run up over $40 since its post-earnings slam. Of course Jeff Bezos being the consummate stock market operator announced a $5 billion share buyback. He’s attempting to push the stock back up because he dumps shares every month and, more important, when AMZN drops back to earth (i.e. below $100) he’ll have a cadre of pissed off employees who agreed to take a high percentage of their salary in restricted stock units (RSUs). At today’s current price, Bezos has paid out close to $500 million worth of RSUs at much higher stock prices. Imagine thinking you are getting paid $100k but when you go to sell your stock, you find out that your salary during that time period was really $25k…My report explains these RSUs and shows why AMZN is the biggest Ponzi scheme in the modern era…

I’ve updated the AMAZON dot CONreport and show what was in the numbers that triggered a $190 sell-off in the stock. I’ve also updated the section of the report that outlines using calls and puts to short AMZN.

AWS will be one of the first cracks of the glacier but what will bring the whole thing down is when that RSU payment scheme unwinds itself. Most analysts are overlooking one of the biggest accounting schemes at AMZN in the history of any large public company: how they pay a good chunk of base salary in RSUs and walking through what that means. That is going to be a day of reckoning for the business school case studies. – a contact of mine who is a former Silicon Valley insider that specialized in tech company accounting

First of all, regard this as a warning to get your cash out of any funds at Legg Mason that are touched by Bill Miller. The last time Miller was this bullish on stocks and AMZN, the S&P 500 collapsed from 1550 to 700 in 17 months.

Miller bills himself as a “value” investor. Yet, currently he has the pools of money he manages at Legg Mason 10% invested in AMZN. This just in, Bill, any stock that trades at a 425x earnings, 2.5x sales and 19x book definitionally is not a value play. Miller’s current highly disillusioned view on the stock market can be seen here: LINK.

Bill Miller’s claim to fame was beating the S&P 500 11 years in a row – until 2008 hit. He did this by making highly concentrated bets in the hot financial sector stocks, homebuilders and hot momentum stocks like AMZN. Nothing complicated there – certainly nothing Miller should have been earning $10’s of millions in fees on – go to the Blackjack table with the hot shoe and bet everything in your pocket on every hand. Of course, eventually the shoe turns ice cold and the dealer wipes you out, quickly.

Fast forward to February 2009 and Miller had one of the worst 10-year track records in the industry. He should have been investigated and barred from the industry. Instead, he’s back to his same old tricks with a 10% bet on AMZN. His fund at Legg Mason is down 20% for the month of January. By the end of the year, I predict that all of the gains he may have achieved over the last 5 years will be wiped out and his investors’ accounts will be incinerated.

If anyone wants to understand why Miller’s position in AMZN is the ultimate example of reckless money management devoid of proper due diligence, you can see the truth in detail in my Amazon dot Con report. I’m working on the 4th quarter numbers and will soon have an update, which will be available to everyone who has bought the big report.

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The weekly issue of the Short Seller’s Journal has been released this afternoon. This is my best issue yet and includes an options trading resource (emailed separately). I have identified a short-sell idea that takes advantage of a highly leveraged company exposed to a highly cyclical industry and has significant exposure to subprime counterparty risk. I also have a leveraged energy sector “Quick Hit” play to take advantage of what appears to be yet another rumor-driven short-squeeze move in the price of oil last week.

Finally, I have some preliminary comments for subscribers on AMZN’s earnings report. Every quarter I seem to discover more problematic aspects to AMZN’s business model. By the way, as predicted, the growth in its cloud computing sales – the so-called AWS buiness – are starting to show signs of slowing down.

Thanks for putting together an informative report with actionable ideas. For years I have stared in stunned disbelief as the rigged up, QE inflated stock market kept defying gravity but it looks like the chickens are coming home to roost now. With the ideas you provide, I hope I can take advantage of the coming downturn with some profitable trades.

When they’re trading 1.5 billion oz. of silver each day in London, the ‘silver’ fix each day is a complete sham. Now the fix has been found to be openly manipulated, it will be interesting to see what happens with the London silver market. – David Jensen, “Silver: Is It The LBMA’s Greatest Rig?”

Strange things are happening in the global financial markets. Most likely evidence of a massive systemic earthquake starting to shake. As many of you know, the LBMA price fix “fixed” the a.m. price of silver 84 cents below the front-month futures price right before the price was “fixed.” This graph to the right shows how the criminal activity went down (click to enlarge).

I awoke this morning and had an email from Bill “Midas” Murphy asking me if the $13.98 low print shown on Kitco was correct. I responded that it looked like there were some “low hanging” stop loss orders that were attacked in an attempt to get the price of silver down. This was before I had learned of the crime committed on the LBMA.

I would love to have an explanation from the committee in charge of overseeing the LBMA fix. The fact that paper silver bounced back almost immediately is evidence that the a.m. fix was a fraudulent act in its entirety. But for what purpose? The price fix is supposed to be the price that balances out the amount of physical silver bars being offered for sale and bid to purchase during morning trading.

The entities selling silver on Thursday morning didn’t just get their faces ripped off, they had their entire head decapitated. These are the entities who should be pressing for investigation. It’s money out of their pocket or their clients’ pockets.

This was my final comment to Bill on this matter: The insider elite are laughing at everyone spending so many calories and so much energy reporting, discussing, analyzing and agonizing over the paper vs. physical issue. Meanwhile the biggest theft in history is taking place right under our nose as they pluck every ounce of physical gold and silver out of the system from the idiots and the idiotic mining companies who are willing to sell it at the paper price levels. The biggest wealth transfer mechanism is the Central and bullion banks. The banking system has been ripping us off in every aspect of our lives for decades. Why on EARTH would anyone question or doubt that they’re ripping us off in the precious metals market? Seriously. Everyone in their heart of hearts knows that gold/silver are the ultimate root of any monetary system. Why would the banks rip us off using paper currency schemes and not touch the metal? For God sakes, the metal is what they’re ultimately after. That’s why the first thing any military does when they take over a country is it takes the gold. The most recent proof of this Ukraine. That practice goes back to at least the Romans.

Someone sent me an excerpt from Ted Butler’s “news” letter in which he rationalized away the reason why the registered gold vault account at the Comex was so low now. Bill, I seriously think he was on LSD when he dreamed that one up.

I guess what’s most troubling about the above incident is the blatancy with which the LBMA crooks implemented their crime. They made no attempt whatsoever to cover up the crime scene. It’s almost like they’re taunting us.

This brings me to the issue of AMZN’s trading today. AMZN stock ran up $52, or 8.9% ahead of its quarterly earnings to be released right after the NYSE close on extraordinary volume of 14 million shares – 2.4x more than its 10-day average daily volume. After the market closed, AMZN’s stock plunged as much at $95 from the close on a disappointing report. It closed out the after-hours session down $85.

I bring this up because there is no question in my mind that the stock was likely run up by one of the hedge funds with a big position in the stock (or possibly two or three in collusion). The purpose of this would be to generate a frenzy of buy activity into which the hedge fund could unload a chunk of stock. This also implies that one (or more) of the big funds was given a “heads up” from inside AMZN about the nature of the report.

The reason I am convinced this is what happened is because I was part of a junk bond trading operation in which this occurred all the time. Back then we had to be more careful because laws were actually somewhat enforced, sometimes with vigor. But if I had a big position in say, Trump Casino bonds, occasionally I would get a tap on the shoulder from one of the Trump bankers in corporate finance who would whisper, “uh, I don’t like your Trump position.”

In present times, the laws and regulations designed to prevent/discourage insider trading are rarely, if ever, enforced. Insider information sharing is almost as blatant as the London silver price fix today. Of course, I have zero sympathy for any of the idiots who chased the stock higher today. Anyone who goes near that stock without doing extensive analytic work will get what they deserve. Some of these big hedge funds who have massive AMZN positions are eventually going to get impaled on their holdings (or at least the pensions they manage money for will). Here’s an example of one of the retail trading oriented dopes who was giddy about AMZN stock before it reported – Timothy Collins of TheStreet.com’s Real Money: I’m Bullish On AMZN Ahead Of Earnings. Nice trade, Tim.

Speaking of AMZN’s numbers, I will hopefully get around to updating my AMAZON dot CON report with the latest information sometime in the next 5-7 days. If you have already purchased the report, please email for the update. If you have not yet purchased the report but have thought about it, I am going to raise the price again (it takes a lot of time and energy to work on this Company’s numbers) once the full research report is published with the update.

Today’s after hours action was just the start of the AMZN bubble deflation process. I don’t know what path it will take, but I know that AMZN’s stock will eventually fall from the $550 after hours close today to below $100. To be sure, there will be periods of time when the stock moves up sharply because Jeff Bezos is the king of highly misleading stock promotion and there’s plenty of idiots out there who lap up his drool with blind greed. My stock report will help you understand why AMZN is one of the world’s greatest Ponzi schemes.

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It began last night with FB’s earnings release, which triggered a spike in both FB and AMZN stock after-hours: LINK. I have been very clear to the subscribers of my Short Seller’s Journal to avoid shorting AMZN ahead of its earnings release after the market today. I also advised them to take profits on any short positions or put positions last week. I have been on the record stating that I fully expect AMZN to report a blow-out quarter. The trick is to understand how and where they are using GAAP/non-GAAP to inflate the net income and “free cash flow” numbers they will report. AMZN continues to burn cash and will continue to burn cash. That’s the bottom line.

Point in case is this puff-piece from Bloomberg News this a.m. which describes how AMZN generates revenues – yet it fails to describe how AMZN turns those sales in real net income and real cash flow. FYI, AMZN states in the fine-print of its 10K/10Q filings that its reported “free cash flow” number is not a metric that conforms to Generally Accepted Accounting Principles – a fact that should not surprise anyone who does real research and analysis on AMZN.